Best way to convert DVD to ? for xbmc

so, hopefully this is an ok to ask this question i wasnt able to find this topic elsewhere.

first. xbmc rocks! every time i use it, i find some new feature that i just love. on to the question....

i have many many hours of personal dv video that i would like to compress in some form so that is would be available on xbmc. but, rather than inventing the wheel, i'd like to see what methods others have used to compress 720x480 avi/etc for the most efficient use on xbmc my xbmc is attached to a 50" plasma, so i'll want the rez to reflect accordingly.

what seems to work best? divx, mpeg4, other?
what meg/hour rate should i expect? 300-350?